Jeff Jacobs - page 18

Real Estate agents go out into the field each day to look for properties to list, or sell. Some have a habit of spending a ton of time on the computer pouring over sales data, that never seems to do much for the market place. We always need inventory, so most agents should be looking for listings.

You as a buyer can rely on the agents ability to find properties for you to make offers on, or you could start looking on your own.

A commercial Real Estate agent picked a neighborhood, drove it, and selected five properties that suited his criteria. He gave the list to a local agent, and told him to keep him updated on the status. These properties weren’t on the market, so the agent contacted each of the five to see if they had an interest in selling. One property did contact another agent who listed the property then contacted the agent who had approached the seller.

These are things that actually happen in a Real Estate market between more sophisticated buyers, and sellers. There is no reason for any buyer to be intimidated in today’s market place in just making an offer. That is what Real Estate is all about; two people who come to a mutual agreement on the terms to buy, or sell a property.

Most of the long term Real Estate agents are in a position to retire. There is a saying that we aren’t in the business to sell Real Estate, we are in the business to buy it. Most of the long time agents bought properties in the 1980s, 1990s, and now have a portfolio that is worth more than they ever imagined. One of the best agents I know retired to Hawaii in 2008, but found some great deals there, and bought, four years later those properties are worth another small fortune, go figure.

We are in a crazy, volatile market. It’s hard to know who to trust, and in my posts here, I’ve talked about some of the good agents that I known.

The reason for this post is that Real Estate agents are different from Real Estate sales. Agents want you to be happy, and make good decisions. They have the luxury to work with you rather than make a sale to make a car payment.

What I always suggest is that you take the time to shop for a Real Estate agent. The number one tip I can give you is to get away from the computer, and go out into the neighborhoods that interest you. Look at the for sale signs, go to Sunday open houses, and network. Real Estate is a relationship business and you should cultivate relationships.

Get to know the players before you enter the game.

Every year we have a Spring Season bounce in home prices, for people buying houses to settle in before the school years starts next year. People buy close to the schools they want their kids to go to. This year in Seattle you do need to live close to the schools you desire.

That led to what some in the Real Estate industry called a feeding frenzy. Multiple offers were the rule for about six weeks this year. Inventory was very low in Seattle, and across King County for that matter. The Northwest Multiple Listing service showed about 4000 homes for sale compared to about 7000 homes for sale last year.

What struck me is that in December, and the early part of January, people were complaining about the quality of the properties listed for sale. In March, and April all those houses were sold. In some cases people were in bidding wars for stale inventory.

Now that we are at the end of April you can see more houses coming on the market with fewer buyers rushing in to snap them up. As we go through the summer it looks like to me we will hear how there is nothing decent for sale, and in August we will see price reductions, once again.

Brokerages have costs, for offices, and providing online presence. It’s a high over head cost that some other Brokerages cut to offer services for a discount, or the new thing is to rebate money at closing. All Brokerages try to present the idea that a Real Estate transaction is complicated, which it is, but once the Principals are in place the transaction itself is kind of automatic.

Agents can hire a transaction coordinator, or many Brokerages offer a transaction coordinator for a fee. The cost is low, because the coordinator gets paid on volume. You can look up mortgage Brokerages that operate on the same principle. A second part of the equation is a virtual assistant who does the little things to keep the transaction moving along.

Total cost for services that are contracted out is about $1000, maybe $2000. If you include the escrow, Purchase, and Sale Agreement a Real Estate transaction could cost as much as $4000 for both sides, total.

So this idea of paying a 6% commission is pretty high. That’s $12000 for a $200K transaction.

On this blog we have talked about why people pay the commissions, and justified the idea of paying a full Brokerage commission. What I have never done is present the realities that the Real Estate industry is loaded with scammers. Online Brokerages are my biggest target for presenting the fact people pay way too much for very little that an Online Brokerages gives them. If you aren’t paying for Real Estate experience, know how, or insider information then why pay the high fees?

Most cities are having more apartment construction projects. There is a demand for housing, and buyers are a little concerned about entering into a 30 year mortgage commitment. There are many buyers squabbling over a low inventory of properties for sale, but sales of low end rental type properties are brisk.

I have always advocated home ownership until now. It just so happens that this housing market crash came at a time when I was in my 50s and have very little need of a house to call my own. I can rent, save, and travel. Some young couples may still have a future of kids, dogs, schools, and family, but many are increasingly interested in saving money in more secure investments.

The family home has traditionally always been a secure part of a portfolio. Recently that idea has been questionable. My personal opinion is that the cost of housing will continue to decline. There are many ways to build a community with density, just like most city planners have promised. In keeping with that, as long as you would consider a town home of condo, the idea of an apartment isn’t too far off, especially if your town home, or condo is going down in price.

Procuring Cause is a Real Estate term. Rebate Brokers have thrown the term around a lot because they write up offers, then give a rebate of the commission. In some cases, other agents have shown the buyer houses, some times several houses, helped line up a mortgage, and worked with the buyer until the buyer finds a house they want to make an offer on. The buyer, in some cases, has gone to the rebate broker after spending hours working with a full commission agent. When the buyer, under these circumstances, writes the offer with the rebate broker, the other agent can, in some cases, claim the commission.

There are things an agent can do to protect themselves, like having a Buyer’s Agency Agreement, but many buyers want to keep their options open, so they are reluctant to sign a Buyer’s Agency Agreement. There are pros, and cons to having an Agreement, but that is an article for another time. The fact is many agents are wiser now than when rebate Brokerage was a new idea.

Rebate Brokers have also cautioned buyers about Procuring Cause, that’s how the subject came up.

It’s a complicated process to claim a commission. It’s done by arbitration, and usually is done between the Brokers. The buyer can do what ever they want. The buyer isn’t obligated, legally, to write up an offer with the agent who showed them a property. Just because some one is there doesn’t mean they are contributing to the buying process. The other thing that is very true is that most buyers use online searches, and so the Brokerages that provide those services should probably claim procuring cause.

This article is just a caution to make buyers aware that there is this issue, but it is a minor part of the home buying process.

From time to time I forget to mention some of the best Real Estate agents in Seattle. Today I ran into Cathy Cowan who I haven’t seen in about two years. She’s been busy helping clients who are referred to her.

She admits she is low key, but diligent, as well as honest. People refer to her, other agents refer clients to her. She has a wealth of experience for multi million dollar homes to helping to sell a town home for a professional couple who has been transferred to another state.

Offering that range gives agents an advantage. I first met Cathy when she partnered with another agent to sell a view property that had some quirks. She took the lead in all of the preparation, and marketing, because she had a feel for the clientele who would be making an offer. The property got offers that Cathy fielded beautifully.

It’s grace under pressure that can get some properties the best price, or get a buyer a better price than a less skilled agent can.

– David Losh

We have a low tech remodel company. Nothing is fancy, everything is functional. It hasn’t done too much in the past three years, but we still prepare properties for sale. In the past we did kitchens, bathrooms, and basements. I have a $10K rule that if you are spending more than that you’re wasting money. You’d be surprised what you can get done.

Yesterday I was in a home that is the middle of a $120K remodel. It’s beautiful. They did everything. What I have been wondering is if there will ever be a return on this obvious investment.

This isn’t the first time in the past two years that I’ve wondered about remodels that made sense five years ago. In the past there was a set of rules about if you invested in a bathroom you could expect a return. Now I look at adding a bath room may get a return, but pretty much maintaining what you’ve got makes more sense. Maybe a new tub surround, or vanity, but gutting a place doesn’t seem to pencil.

The same with the kitchen. No one is going to pay for some one else’s vision of a gourmet kitchen. You can do it for yourself, and that is getting to be more popular, but you have to figure it’s a loss.

Even flippers are starting to cut corners on what they spend, except on system upgrades. Plumbing, and electrical are pretty safe bets for resale. It’s not so much profitable, but buyers are getting pretty savvy about big ticket expenses.